Rollover as Business Start-Up (ROBS)

A Rollover as Business Start-Up arrangement allows an entrepreneur to invest retirement savings into a new or existing business without early withdrawal penalties or traditional financing obligations. When structured and maintained correctly, it is a legitimate planning tool. When it is not, the consequences prohibited transactions, nondiscrimination violations, unsupported valuations, and personal fiduciary exposure  are material.

 

We treat a ROBS arrangement as what it is: a regulated retirement plan subject to ongoing IRS and Department of Labor oversight, not a one-time transaction. Many providers complete the initial setup and disengage. We do not.

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A Note on the IRS's Position

The IRS does not formally approve individual ROBS arrangements. Its 2008 ROBS Compliance Project identified recurring failures that continue to generate audit activity: improper employee exclusion, nondiscrimination violations, and inadequate business valuations. When a retirement plan holds employer stock, the transaction must occur at bona fide fair market value, established annually by a qualified independent appraiser and documented in writing. Without that, the transaction may constitute a prohibited transaction under ERISA and the Internal Revenue Code. The risk is not theoretical.